Commercializing Nonprofits

Published Monday, February 25, 2013

by MATTHEW J. MOWRY

Families in Transition (FIT), a nonprofit in Manchester and Concord that helps homeless families get back on their feet, was receiving more donations than it could use. FIT Founder and President Maureen Beauregard saw an opportunity to turn excess inventory into much-needed cash. So FIT started a store in Manchester in 2002 selling new and gently used clothing and accessories.

FIT now has two stores (a second boutique opened in Concord in 2009) that employ 13 full-timers and two part-timers at above average retail wages. The stores, dubbed OutFITters, generate more than $150,000 in sales annually to support FIT housing and services for the homeless in Manchester and Concord. FIT is considering opening a third store in Dover.

Social entrepreneurism has been gaining steam over the years as government funding has become more restricted and competition has increased for grants, and corporate and donor dollars. Goodwill Industries of Northern New England has 27 stores in Maine, NH and Vermont. It opened its most recent store in January in Amherst, its eighth in the Granite State. Its stores employ 1,750 people and generate just over $30 million in revenue. Southeast NH Habitat for Humanity, which builds houses for families in need, opened the Restore in October 2008 in Dover; three years later it outgrew its space and moved into a former roller skating rink in Newington. Doug Willey, Restore manager for Southeast NH Habitat for Humanity, says that store has generated about $700,000 in revenues for the nonprofit since it opened. The store sells donated home goods, furniture, appliances and building materials to raise money to support its mission. There are more than 800 Restores in the United States and Canada, including one in Ashland and a third in Nashua opening this year (run by other Habitat for Humanity affiliates), Willey says.

Such operations not only bring in a steady revenue stream to support the mission of these nonprofits, but also encourage more donations. “The feedback we get is being entrepreneurial is part of the reason people want to help us,” Beauregard says, adding it is something more nonprofits will need to consider.

Track Record of Success

Social entrepreneurism has its roots in New England. Goodwill was founded in Boston in 1902 by Rev. Edgar J. Helms, who collected household goods and clothing, trained and hired the poor to repair and mend the items, and then resold them or gave them to the poor. That has turned into a $4 billion international nonprofit that still uses that model today. “At Goodwill, our founding principle is that people want to and need to work and contribute to their families and community,” says Anne Roosevelt, CEO of Goodwill Industries of Northern New England. “Revenues go to support programs that help people who have challenges in marketplace employment gain training and skills to find employment and keep it.”

For Southeast NH Habitat for Humanity, store sales are also key revenue. “Restore is the primary fundraiser for us. The majority of the funds to support the organization’s building program come from the proceeds of Restore,” Willey says.

OutFITters’ stores sell donated furniture, housewares, books, and clothing. “One-hundred percent of store proceeds benefit the agency,” Beauregard says. Additionally, clients of Families in Transition are given vouchers to the store upon entering FIT housing so that they can purchase basic living necessities. FIT owns the buildings the stores are housed in, saving the organization at least $200,000 annually in rent that would otherwise go to a landlord, Beauregard says. “We have always taken a business perspective on our mission,” Beauregard says. “More nonprofits need to act like that if they are going to survive.”

Competing in the Marketplace

While each of the organizations has some processes that differ, the models are similar. All three accept donated items, which volunteers sort through— a huge task—to determine what is fit to sell, what needs repair and what should be disposed of. “Volunteers are critical,” Willey says. “There are four employees in the store and a part-time driver. Without the volunteers, we wouldn’t be able to operate.” The OutFITters stores logged 3,700 volunteer hours in 2011, a number that increased in 2012 (2012 figures were not finalized at press time), says Michele Talwani, director of economic development and marketing for Families in Transition.

Each organization takes pride in putting quality items on the sales floor. “We are grateful for every donation brought to our door,” Roosevelt of Goodwill says. “But we don’t put out things that are not usable. If things are broken, stained or ripped in some way, we separate those.” All three organizations do their best to sell or recycle donated items and to screen out unusable items. Last year, Goodwill Industries of Northern New England was able to resell or recycle 71 percent of its donations, says Jane Driscoll, vice president of public affairs. And disposing of unusable items is costly. FIT spends $14,000 annually to haul donated items that are not fit for reuse to the landfill, Beauregard says.

One big challenge nonprofit retail operations face versus their for-profit counterparts is supply chain. Nonprofit stores rely on donations from the public and never know day-to-day what kind of merchandise will be coming through the door and what shape it will be in. But that same challenge also helps to keep customers checking in on a regular basis for deals, as prices are at a major discount. “It’s a cool place to go. It’s a treasure hunt,” Roosevelt says.

At Restore, that can mean high-end kitchen cabinets coming through the door unexpectedly because someone has decided to remodel. “We tell our shoppers to check us frequently. We put a lot of our merchandise, with photos and descriptions, on our website and keep it updated,” Willey says. As inventory rotates every day at OutFITters, it is not unusual to have people lined up when the store opens at 9 a.m., says Talwani. Beauregard says the stores also have to overcome the stigma that still exists around thrift stores and the image some people have of them. “This is not your grandmother’s thrift store,” Beauregard says, noting it is bright, clean, set up to resemble a department store, and there is an emphasis on customer service. “People donate here because of the mission, but they shop here for the experience,” Beauregard says.